CMBS delinquency rate declines in July

In the wake of the housing market collapse, the residential sector struggled to find it's footing, but commercial real estate continued to post promising numbers last month.

In the wake of the housing market collapse, the residential sector struggled to find it's footing, but commercial real estate continued to post promising numbers last month.

The delinquency rate of commercial mortgage-backed securities declined in July, dropping 3.5 percent from a year earlier, according to a report from Morningstar Credit Ratings. This rate has edged lower in seven of the last 12 months and delinquencies are now at an overall 8.49 percent. 

"The movement in both delinquent unpaid balance and percentage continues to be impacted by the size and amount of loan liquidations, modifications, extensions and resolutions reported on a monthly basis, along with new balloon maturity defaults," Morningstar analysts said.

However, the company said it is keeping a close eye on a number of performing loans that could be volatile if the economy takes another major hit. Unfortunately, the owners and investors of securities attempted to refinance many of these loans into more favorable terms, but were unable to do so since they were approaching balloon maturity.

But not every area of the CMBS sector has been successful so far this year. Specifically, mortgage data indicates loans for office buildings had the most delinquencies, accounting for roughly 30 percent of all troubled mortgages.



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